Persistence of Business Cycles in Multisector RBC Models

New York University WP 97-19

Posted: 2 Mar 1998

See all articles by Jess Benhabib

Jess Benhabib

New York University - Leonard N. Stern School of Business - Department of Economics; National Bureau of Economic Research (NBER)

Roberto Perli

Federal Reserve Board - Monetary Affairs

Plutarchos Sakellaris

University of Maryland - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: 1997

Abstract

In this paper we explore whether the changing composition of output in response to technology shocks can play a significant role in the propagation of shocks over time. For this purpose we study two multisector RBC models, with two and three sectors. We find that, whereas the two-sector model requires a high intertemporal elasticity of substitution of consumption to match the dynamic properties of the U.S. data, the three-sector model has a strong propagation mechanism under conventional parameterizations, as long as the factor intensities in the three sectors are different enough.

JEL Classification: E00, E3, O40

Suggested Citation

Benhabib, Jess and Perli, Roberto and Sakellaris, Plutarchos, Persistence of Business Cycles in Multisector RBC Models (1997). New York University WP 97-19. Available at SSRN: https://ssrn.com/abstract=56016

Jess Benhabib (Contact Author)

New York University - Leonard N. Stern School of Business - Department of Economics ( email )

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Roberto Perli

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Plutarchos Sakellaris

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